Thinking about buying a new car, but worried about getting approved for credit? Maybe your credit rating could use a boost first. You’ll be that much more likely to get approved for credit, and for greater amounts of credit at a lower cost to you. Let’s not go out and try to get a mortgage just yet; first, let’s take a look at how to improve your credit rating!
Why Improve Your Credit in the First Place?
Whenever you try to borrow money, like for buying a car, your credit rating is one of the most important things to consider for both parties: you and the lender. You want to make sure the interest on your loan is low, but having poor credit means the lender will want some added reassurance that they’ll get their money back. This means higher interest rates on your loan, or a larger down payment. This can be difficult to afford, especially in the long term, considering all the interest you’re paying.
Your credit rating–or credit score–indicates just how much trust you’ve built in the past with lenders. The stronger that trust, the higher your credit score. Scores range from 300 to 850 points, and the closer you are to that 850 mark, the more likely a lender will be to approve more credit at a lower interest. You could save a lot of money in the long run.
Now let’s get right to it: here’s how to improve your credit rating.
Start with Past Credit Reports
Remember that mistake you happened upon in that one credit report? If you’ve ever found a mistake in any of your past credit reports, then let’s correct that mistake today. Notify the credit bureau right away, and send them your documentation. They’ll contact the lender for you to verify the information. If it can’t be verified, then the information will be removed from your file. Done.
Pay Down Your Debt
Are your credit cards maxed? Then let’s work on that. Lenders look at how much you owe and how much credit you currently have. If you have outstanding balances in multiple accounts, then we should focus on paying off that debt instead of incurring even more dept. Makes sense, right?
Maybe you’re a student with student loan dept? Then consider this an opportunity to prove yourself to lenders. As soon as you pay off that dept, you’re building your credit rating. Now we’re ready to ask for a loan.
Pay Bills on-Time
You might be rolling your eyes at this one, thinking how obvious it is. But if it really were that obvious, then why do so many people have poor credit? When you make a late payment, you might just be reported to the credit bureau. The stamp of “delinquent” sounds as bad as it is, so it’s best to avoid that risk, even if the company has a grace period.
Do you often forget to pay a bill on-time? You’re one of many people. Set up automatic billing with your cable and phone companies, so every month they get their payment right on time.
How to get Your Credit Score
Your credit score can tell you how you’ve been doing for the last several years. It might be a good idea to check it out if you’re just a little unsure. You can do so anytime by visiting one of these credit bureaus:
Black marks on your credit report undermine your credit score, but they don’t have to haunt you forever. It’s true that financing a vehicle is one of the best possible ways to build your credit, but there are plenty of other things you can do to rebuild your credit and get to a place where credit won’t be holding you back from getting a better loan. We hope you’ve found our advice useful, and that you can turn your credit rating into something to be proud of!